Welcome to my weblog to discuss professional approaches for business-integrated quality management in all kinds of organizations. I am particularly interested in critical views to the existing realizations of the quality management and quality assurance and innovative challenges for improving the situation.

Wednesday, June 24, 2009

Integrated quality approach in business networks

Organizations have many different kinds of stakeholders that operate as networks. Networks include customer network(s), partner networks (out-sourcing, crowd-sourcing networks), supplier networks and networks with other business stakeholders.

Among different kinds of organizations there are networks of regional operators and business clusters that should also be taken into account in business planning of individual organization. Also competitors are members of these networks.

People of organizations operate in networks internally and and are involved with external networks, e.g. expert networks and science communities.

In addition to the the closely business-activity related networks organizations’ people are involved with “free” networked communities. According to Einstein "A person starts to live when he can live outside himself". Etienne Wenger defined a concept of “Community of practice” that may be understood as a network of “ProAms” consisting of both professionals and amateurs. Similar networked communities are:

Community of interest

Community of action

Community of context

Communities of circumstance

Communities of position

Communities of purpose

Business communities of all organizations include many different kinds of actors in networks:

Companies or organizations (private, public or not-for-profit)

Corporate-internal business units, competence centers

Individuals, e.g. experts or business managers

Factually, very often organizations’ stakeholders’ networks are not genuine networks but various kinds of organizational extensions or even ”slave networks”. Genuine business networks are primarily unplanned, emergent systems. Their growth is sporadic and self-organizing. A network member’s role can be characterized by centrality in the network as described by concepts activity, betweenness, and closeness (Valdis Krebs). Genuine network members are independent actors. The network as a whole is managed by nobody but each actor has its own characteristic impact in the network

Access = actor’s easiness getting to the resources of the network

Reach = actor’s potential wielding influence in the network

Control = actor’s ability to control over the resources of the network

Relationships phenomena and transactions costs are significant aspects in understanding the formulation and operation of business networks. Interesting and and even still very relevant classical references are Maurice Dobb (1925) and Roland Coase (1937).

According to Dobb there are relations of the person with the rest of the world outside his immediate sphere. He busies himself with the division of labour inside the organization and he plans and organises consciously, but he is related to the much larger economic environment, of which he himself is merely one specialised unit. Here, he plays his part as a single ceIl in a larger organism, mainly unconscious of the wider role he fills.

Coase explaned in his study that firms are entities endogenous to the economic system and whose existence is justified only in the presence of transactions costs to production. Firms and other economic organizations and institutions, exist because people use them as a way to minimize transaction costs

Strong network actors (hubs) keep a network alive, and quality of the network facilitates its growth. Networks compete with each other and one with highest quality wins. Individual actors or small entities may sporadically (according their own decisions) liberate from or join with the network. A network is however robust, and particularly strong hubs keep it together.

It is network member’s own responsibility to keep actively him/her as a network member otherwise he/she drops out of the network. To be successful brand yourself and sell your value on the network.

Business environments and concepts have changed radically in networked businesses. That includes crucial changes e.g. in the following key concepts of business management:

Organizing the business, the business system

Business environments and its behaviour

Stakeholders

Business models, performance and targets

Management and leadership

Technology

Products (goods and services)

Business processes

Work, employeeship

Custom, customers

Business culture

Professional business integrated quality management approaches that consist of:

Quality management concepts and principles

Quality management and quality assurance

Frameworks (ISO 9000 standards and performance excellence models)

Quality methodology

Quality expertise

are very closely related to the above mentioned business management aspects. Therefore traditional professional quality management approaches are not appropriate within networked business environments without innovations. Network quality may not be achieved by traditional quality management means.

Quality of a business (or any) network is based on multiple win / win. Quality of a network may be defined according to the general ISO 9000 definition of the concept quality. According to this basis quality of a network means: “degree to which a set of inherent characteristics of the network fulfils needs and expectations of the involved network members”All network members have their own needs and expectations and they produce something to and get something from the other network members. Network members may get benefits from the whole network, i.e. from its members. Quality of a network may be calculated based on this situation according to the mathematical formula in the following figure:This is also according to Metcalfe’s Law: A network increases in value as the square of the numbers of its users.

A genuine network, so called scale-free network, follows mathematically a power law (see the following figure) that means that:

A network grows one by one node.

A new node is easier linked with a node with many existing links. This power law is also same as the Pareto principle (80/20 principle: 80% of the links are connected to 20% of the nodes)

A slogan that describes a scale-free network says: “Rich get richer”.

The most significant factors for influencing in and getting influences from a network are power and authority in relationships, and effectiveness of communication Paradox of real networks include gaps between private / public and politics / ethics. In a real life politics always overcome ethics.

Benefits of networking relate particularly to new information, knowledge and learning. That is most importatnt for organizations for operational management and strategic regeration.

Learning process is sped up and made more effective through participation in collaborative networks. In fact, best learning and 80% of all learning takes place informally in networks.

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